Humber Real Estate - Course 2, Module 11, Property Value and Listing Price Considerations |53 questions and answers

Comparative Market Analysis What does CMA stand for? - The Appraisal Institute of Canada (AIC) - The Canadian National Association of Real Estate Appraisers What are the 2 organizations that designate appraisers in Canada? Canadian Residential Appraiser (CRA): - Qualified to undertake any valuation and consulting assignment on dwellings containing not more than 4 self-contained family housing units or on residential dwelling sites. Accredited Appraiser Canadian Institute (AACI): - Qualified to undertake any valuation and consulting assignment on residential, commercial, industrial, institutional, agricultural, land and special use property types. The Appraisal Institute of Canada (AIC) offers 2 designations for appraisers. What are they called and what are they qualified to do? Designated Appraiser Residential (DAR): - Qualifies to perform appraisal and consultation assignments of residential property types consisting of not more than 4 housing units and non-complex commercial properties with a residential component. Designated Appraiser Commercial (DAC) - Qualified to provide valuations on all real property types, including residential properties. Certified Appraisal Reviewer: - Are DAR or DAC designated members who have achieved a higher level of training and certification in appraisal review. They are qualified to author either field or technical appraisal review reports on all types of appraisal reports. The Canadian National Association of Real Estate Appraisers (CNAREA) is a not-for-profit, independent association and offers 3 designations for appraisers. What are they called and what are they qualified to do? - Form report (Short form, usually used for financial institutions, relocation companies and government agencies) - Narrative report (More detailed and could be several pages long) In what forms are appraisals typically provided? - Appraisal summary - Letter of transmittal - Title page - Table of contents - Taxes and assessment - Area & neighbourhood analysis - Site and improvement analysis - Approaches to value - Reconciliation (how value estimate was determined) - Limiting conditions - Exhibits (maps, diagrams, floor plans) What does a narrative appraisal report consist of? Yes. A potential seller has recently inherited a residential property and wishes to know how much it's worth for tax purposes. Should you refer the seller to a designated appraiser? No. You should refer them to a mortgage broker and the lender may ultimately hire a designated appraiser to establish the value of the property. A seller would like to refinance his home prior to listing. Should you refer the seller to a designated appraiser? A. Do I have the appropriate education and/or the experience to provide an opinion of value or advice about the value of the subject property for the purpose requested? B. Do I have errors and omissions insurance that will cover the type of appraisal being requested? You should tell the seller that you do not have the education/experience or the insurance coverage to complete the opinion of value requested. The solution may be to refer them to a CRA or AACI. If you receive a request from a seller asking for a signed, written appraisal report on the value of their property, ask the seller why they need it. Before you complete any type of appraisal, written or verbal, what 2 questions should you ask yourself? Opinion of value The Comparative Market Analysis (CMA) is not a formal appraisal but an _________ _____ _________ of a property. Homes currently for sale, have recently sold or did not sell in a defined time period. What does a CMA form include? Through the local listing service or can be purchased through an independent third party. Where can you get a CMA form? The municipality Where can you find information for a CMA such as lot size, dimensions, builder's floor plan, living space, etc.? Time adjustment When gathering information for a CMA, you may need to adjust the price a comparable house sold for to the price it would sell for in the current market. This will require making a _________ _________. - If sold recently, no time adjustment is made. - If sold 6 months ago, and prices of housing have increased since then by x per cent, then an x per cent adjustment will be made. When preparing a CMA of comparable sold listings, how do you make a time adjustment? - If sold house is in the general location of the subject property, no adjustment is made. - If sold house is in an inferior location compared to the subject property, a positive adjustment is made (and vice versa) When preparing a CMA of comparable sold listings, how do you make a location adjustment? - Date of the sale - Location of the sale - Marketing time - Lot size - Square footage When analyzing the data for a Comparative Market Analysis (CMA), what information about comparable properties do you need to take into consideration before choosing a price to recommend to a seller? - The length of time a comparable home spends on the market affects the value. The longer a property stays on the market, the less it will generally sell for. When preparing a CMA of comparable sold listings, how do you make a marketing time adjustment? - Depends on the going rate of the cost per square foot being charged by the municipality. When preparing a CMA of comparable sold listings, how do you make a lot size adjustment? - A salesperson estimates the value per square foot by taking the sale price and dividing it by the square footage of the property. This provides the salesperson with the sale price per square foot of comparable homes. When preparing a CMA of comparable sold listings, how do you make a square footage adjustment? - Adjustments are made to the comparable properties - The objective is to bring the comparable in line with the subject property When preparing a CMA, what is the objective in relation to comparable properties? - Current market conditions (what type of market it is) - Motivation of the seller (do they have time to wait or are they in a hurry to sell?) When preparing a CMA, in order to arrive at recommendations for the seller, what 2 factors do you need to consider? 12 The CMA should only mention comparable listings for the last ____ months. Objective or subjective What a property is worth - its value - can be either ________ or _________. When it is tied to the cost of reproducing the property or replacing the property with one of equal usefulness. When is a property's value objective? Highest and best use What is a property's subjective value also referred to as? The use that, at the time of the valuation, is most likely to produce the greatest net return in money or amenities to the land over a given period of time. Net return for a single-family dwelling may take the form of amenities, such as pride of ownership, comfort and convenience. Explain 'Highest and Best Use' A typical buyer with a reasonable knowledge of the market and property would use or do with the property. The estimate of value of a property is related to what? 1. Do the improvements conform to the zoning, or are they legal non-conforming? 2. Do the improvements conform to the other homes in the area? 3. Do the improvements add value to the land; that is, would a typical purchaser pay for the buildings over and above what they would pay for the land? If the answer to all 3 types of questions is YES, then the current use is most likely the highest and best use of the land. If the answer to one or all the questions is no, then you may need to consider that the value of the site should be based on a different highest and best use. What questions should you ask to determine if the current use of a property is its highest and best use? - Income Approach - Direct Comparison Approach - Cost Approach What are the 3 approaches used by an appraiser to determine the value of a property? False. Only the market can dictate value. If the house would only sell for $30,000 more, for example, the renovation wouldn't be truly worth the money put into it. True or false: If a property has been renovated and the renovation cost $50,000, therefore $50,000 has been added to the market value of the property.